Libertarian paternalists, or nudgers, want to preserve freedom of choice while also using default rules, disclosure strategies, and other aspects of the choice environment to incline people in good directions. Because human beings are subject to systematic errors, libertarian paternalists want to provide a little help.

It is natural to wonder: Why should we trust government? Isn't it subject to systematic errors as well? What about the public choice problem? Isn't libertarian paternalism just a new way to strengthen government's hand?

Part of the answer is that libertarian paternalists insist on freedom of choice, and in many contexts, they would reduce government coercion where it now exists. (See Nudge for more details.) Consider three quick examples:

1. Richard Thaler and I propose to increase freedom of contract between doctors and patients, allowing waiver of medical malpractice liability in an effort to promote liberty and to decrease the cost of health care.

2. Libertarian paternalists are highly sympathetic to the argument for school choice, adding only that steps should be taken to make sure that choices are real.

3. For the mortgage crisis, and for credit markets generally, libertarian paternalists reject bans and coercion and favor disclosure remedies.

Skeptics might object that if public officials are not trustworthy, the paternalistic part of libertarian paternalism is scary. It is true that libertarian paternalists want government to select sensible default rules for contract law, property law, prescription drugs, environmental law, and organ donation. But how can government dispense with default rules?

Short of anarchy, the legal system has to start somewhere; it has to specify what happens if people don't do anything. Legal entitlements don't come from the sky. You can't run free markets without basic rules of property, contract, and tort law, and those rules will operate as nudges, in the sense that they will incline people in certain directions. (Russell Korobkin of this very blog has done excellent theoretical and empirical work on this point.)

At a minimum, libertarian paternalists argue that where a government program is already in place, officials should preserve freedom of choice while also making good outcomes easy rather than hard. Consider the current prescription drug program for seniors.

Libertarian paternalists agree with President Bush that competition is a good idea in this domain. But the program is much too confusing; seniors are given too little help in choosing among twenty or more plans. Sometimes they blunder, just because of the complexity of the program. So long as government is going to have a prescription drug program, it should make it easy for seniors to provide relevant information about their situation and then to get a clear sense of what plan would be best for them.

Libertarian paternalists are not opposed to disclosure requirements. In environmental law and in credit markets, they think that disclosure is often helpful. For school loans, credit cards, and mortgages, Thaler and I propose a species of libertarian paternalism that we call RECAP: Record, Evaluate, and Compare Alternative Prices. The basic idea would be to avoid government mandates in favor of a disclosure requirement that would produce a simple, intelligible statement of existing fees. We think that RECAP would improve the operation of credit markets.

Maybe hard-line skeptics want to reject disclosure requirements altogether. But putting that possibility aside, it's hard to see how distrust of government leads to a rejection of libertarian paternalism a) when a government program is already in place, and the question is how to make it work as well as possible, or b) when (short of anarchy) government action is inevitable, as in the basic rules of contract, property, and tort law.

"Libertarian paternalists are highly sympathetic to the argument for school choice, adding only that steps should be taken to make sure that choices are real."

This is my problem with libertarian paternalism. The caveats seem poised to swallow the rules, over time. For example, who evaluates whether the choice of schools is "real"? In the worst case, we have a government agency that evaluates private schools to see if they are "voucher worthy" on the basis of criteria submitted by powerful lobby groups (teacher's unions). This is why many homeschool advocates are actually weary of voucher programs -- they fear the government intrusion that inevitably comes with any subsidy.

Someone correct me if I am mistaken, but Sunstein and company seem to take the post-New Deal "realist" view that subsidies and regulations are everywhere, and inevitable. Therefore, let's make the best of them! And kudos for them for trying to "make the best of them" in a quasi-libertarian fashion. But some of us still want to limit the reach, scope, and existence of most subsidies simpliciter.

1. Richard Thaler and I propose to increase freedom of contract between doctors and patients, allowing waiver of medical malpractice liability in an effort to promote liberty and to decrease the cost of health care.

But what happens when all the doctors band together and refuse to treat patients who don't sign such a waiver, thus making it impossible to get medical care unless one agrees to give up one's right to sue for malpractice?

If you don't think that will happen, look at the explosion in mandatory arbitration clauses. These days, it's pretty much impossible to do business without giving up your right to sue.

Having effectively evicted us from the label "liberal," the Left now wants to appropriate the word "libertarian" as well.

I guess we should be flattered that our intellectual real estate is appreciating, but I am concerned that the truly freedom-minded will be priced out of the mainstream. If we don't fight to hang on to "libertarian" we could end up with something like "minarchist" - the equivalent of sleeping under a bridge in a cardboard box on the lunatic fringe.

Regarding waiver of medmal liability, I assume you would also allow Insurers to vary their premiums based on whether an Insured patient consents to waiver? Doctors are predictably going to charge a premium for nonwaiving patients, a premium insurers are unlikely to pay without protest.

I agree with Vain Clerk's dispute. Libertarian Paternalism is either a bit sloppy or it is being disingenuous when it comes to School Choice.

The initial LP thrusts seem to be "Default Choices" and "Full Disclosure".

What about those goals requires us to judge the appropriateness of a school? There is already a Default Choice (Public Schools)- though it is arguable whether or not those are the best choice. As for full disclosure, I have no problem with the government requiring standardized ratings for schools using some sort of objective criteria. (Other than tests, it could include tracking of how students do after leaving the school.)

But once you start prohibiting people from certain choices because some vocal minority or minor majority dislikes one of those choices, you have thrown away any form of Libertarianism and you are merely a Paternal Market-Tuner- a person who disregards liberty but understands the power of market forces in shaping its socialist utopia.

Because human beings are subject to systematic errors, libertarian paternalists want to provide a little help.

It is natural to wonder: Why should we trust government? Isn't it subject to systematic errors as well?

This is the heart of the problem. Government institutions also reason based on heuristics. The cost-benefit analyses which underly their policy formulations rest upon numerous simplifications and assumptions: short-cuts, in other words, which get around the practical and theoretically intractable problems of finding optimal solutions to real world problems (as opposed to simple, well-bounded, problems devised by psychologists).

To be convinced that libertarian paternalism is a desirable form of governance, I'd need to be persuaded that these institutional heuristics are less error-prone than those heuristics used by regular folks.

I find the term "Libertarian Paternalism" less usefull than it might be, although I am sympathetic to some aspects.

I strongly feel that the government should not actively encourage vice, as it does with state run and advertised gambling, because I beleive that the problems that will be created wil increase demands for non-libertarian paternalism.

I like to see transparency encouraged, and think that for most people, advocating, say GAAP, migh increase practical liberty. On a similar note, I approve of the policing food quality from, say the problems of Chinese food adulterants, and am not sure how to manage same in a pure libertarian world.

I try to justify this to myself by looking at the economic study of market making, the kind of work that run the Econ Nobel last year, and look to some government involvement/meddling as OK if limited to market making.

I think that well operating markets are one of the principle enablers of liberty. Some markets fail to work well for a vatriety of reasons. Basic rules can help a market to suceed. For example, Farmer's Markets tend to have rules about how far in advance people can set up, whether and how spots can be reserved, etc. If these rules are made with a light enough touch, the market is enhanced, or rather able to operate well. If these are ham handed, the market does not operate well. IIRC, the operational definition of a well operating market is one in which the emergent behavior of each agents interactions with all other agents becomes more important than the initial conditions [market rules].

This does not feel quite the same as Libertarian Paternalism, but it hits most of the examples above.

If you want to offer more choice to seniors regarding their medication payment options, why not also offer them more choice regarding their medication options. As was mentioned the other day, and mentioned years ago by Charles Murray in Why I Am A Libertarian, it would be a simple matter to offer medications both with and without FDA "seals of approval". Those without would likely cost less, and presumably at least some of the time physicians (conscious of their reputation and liability) might still recommend them. Why can't we have options--default or otherwise--at the level of accepting or rejecting the costs and benefits (such as they might be) of the regulatory state itself?

Do "libertarian paternalists" believe airlines should be allowed to book "all smoking" or "gun-carrying allowed" planes, subject to people signing a waiver indicating their understanding of the involved risks and benefits (and subject to their only being flown by employees, perhaps better paid employees, who voluntarily agree to fly--say, were specifically hired for--such flights?

Where do "libertarian paternalists" stand on states passing medical marijuana laws? If they believe (as I assume they do) that such laws should be accepted by the federal government as an example of federalism and individuals in such states following such laws not pursued at the federal level, do "libertarian paternalists" also believe one should be allowed to set up private housing developments--private gated communities--where drug laws are not enforced. In other words, if the risks to others were reasonably minimized, could people choose to opt out of puritanical drug laws?

These vignettes are designed to make the point already made by others that, from a libertarian perspective, the choices introduced by libertarian paternalists occur at much too low a level of generality. It is like saying offering the condemned the choice of death by hanging or lethal injection is "libertarian" because it offers a choice.

Regarding waiver of medmal liability, I assume you would also allow Insurers to vary their premiums based on whether an Insured patient consents to waiver? Doctors are predictably going to charge a premium for nonwaiving patients, a premium insurers are unlikely to pay without protest.

Since the insurers currently largely negotiate fees, this is more likely going to be a function of a negotiation between the insurer and the MD rather than the MD and patient. The patient may or may not have the option but agree to the waiver under the terms of their medical carrier's policy.

Libertarian paternalists are not opposed to disclosure requirements. In environmental law and in credit markets, they think that disclosure is often helpful. For school loans, credit cards, and mortgages, Thaler and I propose a species of libertarian paternalism that we call RECAP: Record, Evaluate, and Compare Alternative Prices. The basic idea would be to avoid government mandates in favor of a disclosure requirement that would produce a simple, intelligible statement of existing fees.

You're a law professor and you actually think this is achieveable? Certainly, you have purchased a house. The sheer volume of paperwork presented at closing is staggering even for the most diligent and informed purchaser.

Heck, even the most mundane credit card agreement has pages and pages of disclosures and agreement written in four point type.

Cass, I'm having a real problem with this whole argument: if you're picking the choices I'm allowed to make, how is that different from forbidding me choices that you don't approve?

Or, put another way, the core notion of the libertarian sense of the word "liberty" is that it means lacking coercion. You are proposing a scheme where you will coerce my compliance by giving me "choices" you assign. This may be preferable to coercing my compliance with a single choice, but hardly seems in any way libertarian. It seems like a prevarication.

Oh yeah, that concept [FDA seals of approval] has been a rousing success with the supplements industry.

True . . . as in actually true. Doctors tell patients to take vitamins and supplements all the time. They (the doctors) are very precise about what they want their patient to take. It works.
(Hey, even stopped clocks . . .)

NI - But what happens when all the doctorsstates band together and refuse to treat patientslicense doctors who don't signrequire such a waiver, thus making it impossible to get medical carelicensing unless one agrees to give up one's right to sue for malpracticepractice risk-free?

Maybe hard-line skeptics want to reject disclosure requirements altogether. But putting that possibility aside, it's hard to see how distrust of government leads to a rejection of libertarian paternalism a) when a government program is already in place, and the question is how to make it work as well as possible, or b) when (short of anarchy) government action is inevitable, as in the basic rules of contract, property, and tort law.

I agree with the notion that given an existing or apparently inevitable government restraint on liberty, a better practical choice is to reduce that restraint to a "nudge" to the extent politically possible. To demand an outcome of no restraints, when the alternative to losing that battle are existing or inevitable draconian restraints, is to make the perfect the enemy of the good. In that sense, libertarianism becomes a practical and achievable direction, instead of an ideal but unrealizable endpoint.

However, some aspects of any specific "libertarian paternalist" policy must be considered in detail as well:

What are the practical potential "loopholes" available for abuse by government authorities?

What are the practical potential "loopholes" available for abuse by nongovernment rent seekers or thieves?

How do these compare with opportunities for abuse, or actual existing abuse, in the existing regime?

These are not general questions for the general policy approach of "nudging", but specific questions for the particular "nudge" policy proposed. I suspect, but others may disagree, that many of the "nudge" examples proposed would present fewer practical opportunities, and less likelihood of abuse, than the existing alternative and more draconian policy.

Richard Thaler and I propose to increase freedom of contract between doctors and patients, allowing waiver of medical malpractice liability in an effort to promote liberty and to decrease the cost of health care.

If this concept is valid, why is it limited or even focused on medical malpractice?

Why not increase "freedom of contract" between restaurants and patrons, allowing waiver of tort remedies for food contamination in an effort to promote liberty and to decrease the cost of food and dining?

Oh yeah, that concept has been a rousing success with the supplements industry.

Right. I just noticed today the Form 1040 line where I had to certify I had taken my quota of nutritional supplements.

I've always been of the opinion that If one doesn't like vitamin supplements, one doesn't take any. What business is it of the government, or any other busybody, whether somebody else takes them or not?

I like the VC and read it fairly regularly, although I am not a libertarian. For that reason, the arguments critiquing the "libertarian paternalist" position ("it's not truly libertarian") don't bother me quite so much. As Sunstein points out in his second post, and as a variety of scholars have emphasized for years, the market doesn't exist in a "state of nature;" it requires (19th century common law definitions of) contract, property, and tort; it requires courts to enforce these private arrangements; it requires bankruptcy laws to redistribute capital; and so forth. Default positions are inevitable, and we may as well argue about the relative merits of various arrangements.

But, contrary to the title of Sunstein and Thaler's law review article, I do believe LP is an oxymoron. Recall the behavioral premise of their work: defaults are sticky; seemingly-trivial costs are nearly insurmountable; people won't make "good" choices even when they're easy. Therefore, they don't "opt-in" to 401(k) plans, and we should instead require them to "opt-out." This is their prime example, and it is libertarian for preserving choice (opt-out) but paternalistic for "nudging" toward the good.

But the premise contradicts the conclusion. If people do not make choices when they are nearly-costless and easy under the status quo (to opt into the 401(k)), why will they magically do so under the "nudge" regime of opt-out? Put another way: the premise of LP is that people very often will not choose non-default options. Then, the conclusion is that we should set up a system that preserves choice because people are free to, well, "choose non-default options." But if they didn't do it in the first world, why would they in the second?

This leads to my argument that LP presents the illusion of choice, not choice itself. If I'm correct, then Sunstein is disingenuous: marketing his system as one that preserves choice while basing his system on the fact that people don't choose (they way we think we choose). If the system is one of value imposition, let's at least be intellectually honest.

(FWIW, my view is that any system will involve value imposition to some extent, so let's argue about what form that will take, instead of pretending we're talking about "freedom" vs. "coercion.")

rcp- so lemme get this straight, the costless (or nearly so) choice to opt out is really an illusion?

J.F. Thomas- many libertarians get giddy about the idea people should be free to contract away any right they want... of course I doubt they are the ones that want to do the contracting away, rather they just want companies to be "free" to exploit people contracting away their rights.

I'm somewhat sympathetic to Sunstein's argument, but I think there are clear dangers in 'default choices'. If the government selected particular Medicare prescription drug plans as the defaults for people with particular characteristics, those default values (and the algorithm that selected them) would be the subject of intense industry lobbying, and the potential for political payoffs would be high.

In fact, we could hardly ask for a more perfect example of exactly these kinds of default choices being corrupted than in the .

But the premise contradicts the conclusion. If people do not make choices when they are nearly-costless and easy under the status quo (to opt into the 401(k)), why will they magically do so under the "nudge" regime of opt-out? Put another way: the premise of LP is that people very often will not choose non-default options. Then, the conclusion is that we should set up a system that preserves choice because people are free to, well, "choose non-default options." But if they didn't do it in the first world, why would they in the second?

The problem is not that all people do not make choices, it's that some people do not make choices -- even when making a choice benefits them -- because of laziness, ignorance on the subject, a limited amount of time, or various other reasons. This is true not only when experts feel the choice is beneficial, but also when the people themselves feel the choice is beneficial. Everyone I know says they should save more money, but some of them never get around to opting-in to a 401(k).

Sticking with that 401(k) example that everyone seems to use: Let's say one-third of employees actively want to participate in a 401(k) plan, one-third are actively opposed to participation, and one-third will do whatever the default it. Switching the system from opt-in to opt-out increases the participation rate from one-third to two-thirds, and switches the slight burden (really just an inconvenience) of clicking on a box from one group to another. If most of the passive third feel that participation in a 401(k) is a good idea -- and we'll posit here that they do -- switching the default option helps them and does not net harm to the other two-thirds.

Obviously this doesn't work in all cases. If the passive third would prefer not to participate -- though not enough that they will make an active choice -- switching the default would be paternalistic, but probably wouldn't appeal to libertarians (like you, I'm not a libertarian, so I don't presume to speak for them). And when the numbers don't break down as neatly as they do in my example -- and they never will -- changing the default will either have a much greater upside, or will result in a much greater inconvenience. My hunch is that the benefits of making 401(k) or health insurance opt-outs would outweigh the costs, while the benefits of making eye care or mental insurance opt-outs wouldn't. Perhaps in a future post Prof. Sunstein will provide some data to evaluate the ideas he proposes.

Speaking of disclosure requirements, what might Sunstein say of state bar organizations that regulate lawyers? Isn't the appropriate thing to do to force would-be lawyers to disclose whether they're taken the bar exam, and if so how many times, and whether they've passed or failed? What business does the state have--in the form of the state bar--making consumer choices for citizens and corporations who are often plenty well-informed to make those decisions for themselves?

I generally agree with Jesse's point, that there could be big upsides to the LP program. And that's why, from a welfare perspective, I'm not really bothered by the non-libertarian aspects to the proposal. But I think it's disingenuous of Sunstein to claim that there is a non-coercive choice element to the program.

rcp- so lemme get this straight, the costless (or nearly so) choice to opt out is really an illusion?

It doesn't really matter. What matters is that Sunstein's program is based on the premise that status quo's nearly costly opt in is an illusion. After all, if we could all costlessly opt into 401(k)s, then why would we need LP at all? Sunstein hangs the theory on the fact that defaults stick for a variety of reasons, and that therefore (many) people do not choose away from them.

If that's the case and Sunstein's premise is correct -- and I deliberately use the word "if" -- then the resulting "choice" is illusory, because the program is premised on large numbers of people not opting into or out of non-default choices.

Now, I think there are very good reasons to think Sunstein's premise is correct. The psychological/behavioral studies of the past decades cast serious doubt on the notion that people are running around freely choosing in some Lockean sense. I think even people like Ed Glaeser have come around to this view. And since I don't hold libertarian precommitments, the "coercive" aspects of LP don't bother me. I think that if people are making decisions in a way that's systematically biased, then talking seriously about correcting them, even at the expense of some "choice" is worthwhile. But it's misleading to say that LP values choice by rearranging defaults. After all, the same could be said for the very status quo that LP seeks to alter.

rcp311- the fact that many people don't make a choice doesn't in any way make the choice is illusory. If you order a burger a restaurant states "all burgers will be cooked medium unless otherwise specified", my choice to have a burger other than medium isn't illusory, even if I don't care enough to ask for my burger well done. Compare that with a restaurant that doesn't value choice, and says "all burgers will be cooked medium." Obviously, the first restaurant values choice, significantly moreso than the second restuarant, since it gives you the opportunity to choice what kind of burger you want, even though it has a default. You're equating not making a choice with not having a choice, and that is completely false.

rcp311- the fact that many people don't make a choice doesn't in any way make the choice is illusory. If you order a burger a restaurant states "all burgers will be cooked medium unless otherwise specified", my choice to have a burger other than medium isn't illusory, even if I don't care enough to ask for my burger well done. Compare that with a restaurant that doesn't value choice, and says "all burgers will be cooked medium." Obviously, the first restaurant values choice, significantly moreso than the second restuarant, since it gives you the opportunity to choice what kind of burger you want, even though it has a default. You're equating not making a choice with not having a choice, and that is completely false.

Adam J - I understand. Pehaps the problem was your comprehension of my formatting! ;-)
"But what happens when all the states band together and refuse to license doctors who require such a [med mal] waiver, thus making it impossible to get medical licensing unless one agrees to give up one's right to practice risk-free?"

The "libertarian paternalism" phrase annoys me because it has nothing to do with libertarianism. Having choices is not equivalent to libertarianism. A better name would be "non-coercive paternalism" or "stern look paternalism" (make your own choice, but get a stern look from Dad if you don't choose wisely).

As a libertarian, my take on this topic is that people make bad choices all the time. In a libertarian society (which we are not, by a long shot), their choices would be nobody else's business. But, in our paternalistic nanny state, the government and self-appointed busy-bodies believe that our decisions should be directed by them. They need to find productive work.

subpatre - but "libertarian paternalism" wouldn't let doctors require a waiver, it would only allow doctors to offer a waiver as a choice to patients, presumably with a corresponding reduction in costs. The issue with this that I see is that doctors may manipulate this so that the costs of not waiving are so high as to make it cost prohibative.